German consumer sentiment is poised to push up to a one-year-high in July as shoppers become less worried about the economic outlook and more willing to spend, the GfK market research group said today.
The forward-looking GfK consumer sentiment indicator, based on a monthly survey of 2,000 Germans, rose to 2.9 for July from an upwardly revised reading of 2.6 in June. This took the headline index to its highest level since July 2008.
June originally yielded a reading of 2.5, and economists polled by Reuters last week had predicted it would be unchanged.
“Following an increase in signs that the economic slump may be bottoming out, consumers' hopes that the economy may be stabilising have picked up,” GfK said in a statement.
One reason for this was the robust state of the labour market, while a slowdown in inflation also helped, GfK said.
Chancellor Angela Merkel's government has forecast the German economy will shrink by some six percent this year, which would be a contraction nearly seven times more severe than in any year since World War Two.
However, job losses have been subdued by historic standards, partly thanks to government subsidies which encourage firms to reduce working hours rather than fire staff.
Moreover, a sharp slowdown in inflation - in May, the national gauge of consumer prices was unchanged year-on-year for the first time since German reunification in 1990 - has helped to bolster purchasing power.
All three sub-components of the survey, which refer to June, improved over the past month, GfK said.
The survey's gauge of consumers' willingness to buy rose to 14.5 in June from 12.5 in May. A separate measure of their economic expectations climbed to a nine-month high of -22.6.
The sub-index of consumers' income expectations rose six points to 14-month high of -3.3, the Nuremberg-based GfK said.
In further evidence of an improvement in Europe's largest economy, the Ifo economic research institute reported on Monday that its monthly gauge of business sentiment rose in June for the third straight month to reach a seven-month high.
Yet despite the latest pick-up in German consumer sentiment, GfK noted that many labour market experts expected unemployment to rise more sharply as the year progressed.
“So there is a question mark hanging over whether we're actually looking at the start of a lasting improvement in consumer sentiment,” the market research group said.
Reuters